Better AI Stock: SoundHound AI vs. Kaltura

Growth investors are always looking for the next big thing. These days, most of those ideas involve companies doing something new or interesting with artificial intelligence (AI).

I'm here to talk about two experienced AI innovators you may not have heard of yet. SoundHound AI (NASDAQ: SOUN) and Kaltura (NASDAQ: KLTR) only recently entered the stock market to support their newfound ambitions for business growth -- but the companies already are about two decades old.

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One company takes an AI sledgehammer to audio-related problems, while the other applies AI smarts to video conferencing. Let's take a closer look at these multimedia-focused AI experts and figure out which one might be the better investment in 2025. (Spoiler alert: There might not be any immediate winners in this race.)

The road to 2024

SoundHound AI builds its current services around the audio analytics technology it started developing when smartphones were new and exciting. Its eponymous song identification tool is still available but has become a side gig for the company.

Over the years, SoundHound AI's focus has shifted to providing voice analytics for corporate customers. Leading growth areas today include phone-based menu systems, drive-through ordering windows, and infotainment system controls in cars. But the money-making business started with lessons learned from its AI-powered song-identification app.

Kaltura was also there when flip phones were cool. The company was founded in 2006 with a vision of providing value-added video services for online conferencing and live-streaming of various events. That's still Kaltura's focus.

The company won several industry awards for enterprise video conferencing in 2020, stiff-arming competitors like Zoom Communications and Cisco Systems in that industry's richest golden age. As expected, Kaltura's sales soared amid the coronavirus lockdowns and slowed down in 2022. Its video services come with AI-based tools to edit clips, manage content, organize large streaming events, and insert instructional material in video-based education.

Why Kaltura and SoundHound AI are hot right now

These AI stocks have been crushing the market lately. As of this writing on Dec. 30, Kaltura's stock had gained 86% in six months, while SoundHound AI's share price rose 490% over the same period. Their daily trading volumes are also soaring:

SOUN 30-Day Average Daily Volume data by YCharts.

They have soared for different reasons, though. Kaltura's stock plummeted 94% from its early record price as Zoom came to dominate what was left of a colder video conferencing market. The recent surge has only made up for a small part of that terrible fall and was inspired by Kaltura's management seeking a buyout exit.

SoundHound AI's gains are more business-oriented. The stock soared in the spring of 2024 as Nvidia disclosed a small investment in the company. Later, the AI chip leader also presented a couple of collaborative projects, including a SoundHound AI platform (using Nvidia processors) that can deliver AI-assisted voice interpretation without the help of an internet connection.

Even more recently, SoundHound AI's stock attracted attention on social media channels, resulting in skyrocketing gains that could evaporate at any moment. SoundHound AI has become a meme stock, manipulated by social media influencers who are hoping for quick gains when short-sellers are forced to cover their losses on a rising stock.

Why I'm skipping both SoundHound AI and Kaltura today

Unfortunately, I wouldn't buy either SoundHound AI or Kaltura right now.

• Kaltura's high-octane growth has faded out, and most investors are just looking for a profitable buyout at this point. That's not a long-term investment thesis, so I'd prefer to look elsewhere.
• SoundHound AI is a robust business with an impressive customer list and rapid sales growth. At the same time, the meme-stock action has driven its stock price to unsustainable price levels. The highest price-to-sales ratio in the S&P 500 index is Palantir's 64.7. Market darling Nvidia sits near the top with a price-to-sales ratio of 37.3. SoundHound AI makes them look cheap at 123.9 times sales, not supported by bottom-line profits.

If and when SoundHound AI's social media backers achieve their short-squeeze dreams, the stock's price spike should quickly turn into a rout. These dramas rarely end well, so I locked in most of my SoundHound AI gains two weeks ago. I still believe in SoundHound's business prospects in the long run and will happily boost my stock position when the share price becomes more reasonable again.

However, this simply isn't the right time to buy stock in Kaltura or SoundHound AI. My favorite AI stocks in this market come with lower valuation ratios and much greater chances of achieving positive returns from this point.

Should you invest $1,000 in SoundHound AI right now?

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Anders Bylund has positions in Nvidia and SoundHound AI. The Motley Fool has positions in and recommends Cisco Systems, Nvidia, Palantir Technologies, and Zoom Communications. The Motley Fool has a disclosure policy.